[ad_1]
By Frank Corva
In almost any crypto-related article you read these days, you’ll hear about a “crypto crash” or a “crypto winter.”
While it’s surely true that the crypto market has taken a beating as of late, it’s also true that how far you zoom in or out on your digital asset price charts plays a big role in how you perceive crypto markets.
And it’s important to acknowledge how much digital assets have risen in price compared to traditional assets in the last almost two and a half years if we’re to truly get a better understanding of the current state of the crypto market.
Let’s rewind back to the March 2020 market crash to get a baseline for how specific assets have performed since then.
SPY vs. BTC
If you’d purchased a share of the SPDR S&P 500 ETF Trust (SPY) at its low in March 2020, you would have paid approximately $219 for it. If you’d purchased one Bitcoin (BTC) around that same time, you would have paid approximately $3,700 for it.
Today, that share of the SPY is valued at approximately $385, while one Bitcoin is valued at approximately $20,000.
In other words, if you’d purchased a share of the SPY at its lowest in March 2020, you’d be up about 57% on your investment, while if you purchased some BTC at that same time, you’d be up about 540%.
And this is the case despite the fact that 2021 was hardly BTC’s year. Instead, 2021 was the year of alternative Layer 1 and Layer 2 blockchain networks — blockchains other than Bitcoin or Ethereum (ETH) — like Solana (SOL) and Polygon (MATIC).
Polygon (MATIC)
Polygon is a Layer 2 blockchain protocol. Layer 2 blockchains are designed to sit “on top” of Layer 1 — or base layer — blockchains like Bitcoin or Ethereum. Layer 2s are designed to take some of the processing burden off Layer 1 networks.
As recently as January 2021, MATIC was trading for slightly over $0.01. Today, post–crypto crash, MATIC trades at $0.58.
So, if you’d purchased MATIC some time between April 2019, when the asset came to market, and January 2021, you’d be up approximately 5,800% on your investment — again, post–crypto crash.
You’d have seen similar returns if you’d purchased SOL in January 2021 while it was trading for approximately $1.80, as it’s now trading for approximately $34.
Not all crypto is the same
Why do I point out that investing in the native assets of Layer 1 and Layer 2 protocols 20 months ago would still have you plenty in the green? Because the blanket term “crypto” is a very misleading one.
Often, when media outlets — especially mainstream media outlets — report on digital assets, they report on these assets as if they were all the same, which is far from the case.
In the broader crypto ecosystem, there are governance tokens (e.g. AAVE, MKR), oracles (e.g. LINK, BAND), privacy coins (e.g., XMR, ZEC), exchange tokens (e.g. BNB, FTX) and a wide variety of other types of digital assets. Some of these assets are still trading far off the lows they experienced in the last two-and-a-half years, and some aren’t.
Native assets for alternative Layer 1 and Layer 2 blockchains are one type of digital asset whose price has held up relatively well.
In 2021, the alternative Layer 1 and Layer 2 narrative kicked into full gear, as prices for assets like MATIC, SOL, and AVAX — the native asset of the Avalanche blockchain — took off.
These assets are the currencies that fuel the new virtual economies of decentralized finance and NFTs. And they are still worth much more than they were 20 months ago.
Measuring digital asset prices from all-time lows
The market for digital assets is still very young. Like the price tag on any burgeoning technology, the price tags on all crypto assets are experiencing extreme volatility right now. Consider the historical price action for Amazon and Meta Platforms — formerly known as Facebook — stocks as reference.
Volatility isn’t an indication that these assets are dead, though. Nor does it mean we’re guaranteed to be in a prolonged “crypto winter.”
Most analysts and news outlets would have you believe that crypto is over and that investors should just pack it up and go home.
When you measure the current prices of most crypto assets from their all-time highs, their perspective is understandable.
However, I’d urge you to consider how far off specific digital asset prices are from their all-time lows — lows that they experienced as recently as less than two years ago.
During these downturns, it sometimes helps to zoom out to see how far we’ve come rather than how far we’ve fallen.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
[ad_2]
Source link
